Updated: Friday, October 3rd, 2014 at 8:51am

SANTA FE, N.M. — Santa Fe Mayor Javier Gonzales has put forth the first big idea of his administration – the possibility of creating a public bank in Santa Fe.

He said last week, before the start of a day-long symposium on the concept, that the city is seeking proposals to hire a consultant to help determine the feasibility of a public bank here.

“We are not going to rush into anything, but we are going to move forward in learning and understanding how to develop a bank in Santa Fe, and being honest about whether we can truly pull it off or not,” the mayor said. “That remains to be seen.”

He noted that city government’s bank these days is Wells Fargo. “They do a great job, but they also take city revenues, taxpayer dollars, and they use those dollars as part of a loan portfolio for folks outside of Santa Fe and New Mexico.”

With loans for small businesses way down since the recession, Gonzales said, “You have to pause and wonder, is this the best structure for our community?”

Exhibit A for advocates for public banking is the Bank of North Dakota, started in 1919. It now has assets of $6.8 billion and made a profit of $94 million in 2013. Over the past decade, it has returned $300 million to North Dakota’s general fund.

The bank’s latest annual report trumpets programs to help expand child care services, allow consolidation of student debt, provide financing for rural mortgages and rebuilding from a flood, support the new trend toward “agri-tourism” and work with local banks on small business loans.

Chip Chippeaux, chairman of locally owned Century Bank, acknowledges that the Bank of North Dakota looks like it’s done pretty well. “It’s sort of a captive bank for the state,” he said. “Its deposits are insured by the full faith and credit of the state. It looks like they can find niches where a need has not been fulfilled.”

But Chippeaux said he’s not seeing a specific need for a public bank in New Mexico.

“It all sounds good, but they haven’t identified the problem they’re trying to solve. They talk in generics,” he said. And he said a public bank, handling public money, probably wouldn’t take more risk than local community banks already do. “I assume if it was public money, they would want to go through the same evaluation,” he said.

Chippeaux said that New Mexico has financial agencies – like the New Mexico Finance Authority and the state Mortgage Finance Authority – that plug some of the gaps. And there are “banker’s banks” from other states that take on portions of loans over what community banks can afford.

Chippeaux said he gets the idea about keeping Santa Fe money local and away from Wall Street banks – his Century Bank is a community bank, after all. “Doing business local, within the community, the money moves around town, I agree with that,” he said.

“But the cost of putting together a bank is not inconsequential,” Chippeaux said. He also warned against “social engineering” with the banking system, saying Congress’s push to make home loans easier to get helped cause the recessionary problems of Freddie Mac and Fanny Mae.

High hopes

The mayor’s goals in considering the public bank option are in fact lofty.

“The mission is a resource and mechanism by which we can assure that every person in Santa Fe can reach their full potential,” Gonzales said. “It’s not just going to be about small business.”

He said that a public bank could help build “social infrastructure” by financing broadband technology, early childhood education programs or expanded and improved health care services.

“Banks are in the business of generating profits for shareholders,” Gonzales said. “Public banks would be in the business of generating value and enrichment for citizens of the community who are investors in the bank just by the nature of their presence. That’s a fundamental shift in how we think about capital and the use of capital.”

Some of the profits, he said, “can be reinvested into a social issue.”

If there’s a philosopher behind the public bank idea, it’s Santa Fe’s Craig Barnes, whose background includes working as a civil rights lawyer, international negotiations on nuclear weapons and ethnic cleansing, and opining as a commentator on local public radio. He’s founder of WeArePeopleHere!, which, as its website says, is a response to “the rise of plutocracy and the role international banks play in it.”

Barnes said at last week’s event with the mayor that the mission of a public bank is to take on “the financial engine of capitalism to use it for the benefit of the local region.” He said there is no reason for “having the money that taxpayers put into the coffers of the city of Santa Fe go to some global bank that invests in the copper mines in Kenya or water-stealing in Ecuador.”

“We can take on the responsibility for our own lives, our community, our own objectives,” Barnes said.

Barnes said a public Santa Fe bank might never take individual deposits and could be capitalized by taxes, fees or revenue bonds issued by the city.

German experience

Also speaking last week was Thomas Keidel, director of financial market relations for Germany’s association of savings banks, which are public banks that, as Keidel put it, “haven’t got any owners – they’re not state-owned and they’re also not privately owned … . They belong to the community.”

They’ve been around for 200 years; there are 417 now and even smaller cities have them. Volkswagen got its initial financing from a savings bank and continues to keep its account there. “It’s not a miracle,” Keidel said of public banking. “You’re not inventing something new.”

He also said the savings banks are the biggest taxpayer in Germany, but the euros don’t go to Berlin. “They go to the region or town.”

Keidel may have put his finger on the politics of public banking when said he was giving a presentation in New York, and someone got up and shouted that he was “the last Communist.”

Gonzales seemed to address that perception when he said Santa Fe “has been down this road before” when the City Council implemented the “living wage” ordinance in 2004 that now has the local minimum wage at $10.66 an hour.

“We were told you can’t do this, it’s going to hurt the local economy, this should be left to the federal government,” he said. Santa Fe was “courageous” then and he expects similar arguments against a public bank, Gonzales said.

Barnes said that for Santa Fe to begin a conversation about public banking is “a huge deal.”